🚀 Market Report.
📉 This week, U.S. Federal Reserve, the Bank of Japan and the Bank of England all held rates steady.
📊 German equities reached historic highs this week. The pan-European STOXX 600 index gained 0.6%, with European banks leading the gains, followed by energy and automobile and parts shares. The aerospace and defense index closed at a record high, advancing 1.4%. However, bond yields rose in Germany. The price to be paid for abandoning fiscal discipline is already emerging, an increase in the debt premiums of Europe’s largest economy.
💷 While Germany faces a final vote on its massive borrow-to-spend splash on Friday, Britain’s government receives another report card on its attempts to reduce expenditure. The British government disbanded NHS England and returned direct ministerial responsibility to the health service after British Prime Minister Keir Starmer promised to “hack back the thicket of red tape” choking the economy.
💰 British government is working to rebuild its fiscal buffer through spending cuts and accounting adjustments, as it faces a weaker economic outlook and higher borrowing costs. British Finance Minister Rachel Reeves is expected to announce that she has rebuilt a £9.9 billion ($12.83 billion) fiscal buffer, known as the ‘headroom’, due to concerns over inflation, higher borrowing costs, and weaker economic growth. The headroom was projected by the independent budget watchdog last October, but think tanks suggest it was likely wiped out. Reductions in government expenditure and welfare spending, along with an accounting adjustment, will compensate for the lost budget flexibility.
📈 British consumer morale ticked higher for a second month running in March, with the GfK Consumer Confidence Index rising to -19 from -20, a three-month high. Confidence among consumers and businesses had slid last year after the new government said it had inherited a troubled economy and raised taxes on employers to fund higher public spending.
📉 Meanwhile, the OECD has revised its UK economic growth forecasts downward for 2025 and 2026, predicting slower growth due to global uncertainty and changes in trade policies, including U.S.-imposed tariffs. The UK’s 2025 growth projection is now 1.4% (down from 1.7%), and 2026 is trimmed to 1.2% (previously 1.3%). Despite these reductions, the UK is still expected to outpace France, Germany, and Italy, ranking as the second-fastest growing G7 economy after the U.S. Official UK growth forecasts for 2023 remain overly optimistic at 2%, significantly higher than the Bank of England’s estimate of just 0.75%.
✈️ Heathrow Airport in London, Europe’s busiest and the world’s fifth-busiest airport, will be closed all of Friday after a huge fire at a nearby electrical substation wiped out power, disrupting flight schedules around the world. British Airways alone had 341 flights scheduled to land at Heathrow on Friday, and the airline said it is working to update customers on their travel options.
💳 Philip Lane, chief economist for the European Central Bank, stated that in order to reduce the use of cryptocurrency tokens known as “stablecoins,” the EU must introduce its digital euro, which has been in development since 2021. According to Lane, the possibility of foreign stablecoins gaining traction within the union would be reduced if the EU launched its own electronic currency.
📲 It seems that Lane is not subscribed to our reports and is unaware that in 2021 the Nigerian government launched its CBDC eNaira in an attempt to discourage the use of Bitcoin among its population. A year later, by forcing its entire population to use digital wallets, they succeeded, but they opted for Bitcoin again. It seems that if citizens do not trust their government, digitising them only leads to non-governmental digital solutions.
🌱 The big oil companies are returning to their core business, and clean tech stocks have plummeted since Trump, a fossil fuel acolyte, returned to power. Renewable energy projects, such as wind, solar and batteries, are being acquired at a bargain price by private infrastructure investors.
🌍 Geopolitics:
🤝 Yesterday, after the European summit, the EU leaders, except for Hungary’s Viktor Orban, pledged to “continue to provide Ukraine with regular and predictable financial support” and said EU members should “urgently step up efforts to address Ukraine’s pressing military and defence needs.” However, there was no immediate commitment to the 5 billion euros requested by Zelenskyy. Reuters said that there was a division between EU countries closer to Russia, which have provided more aid to Ukraine, and those farther away that have given less, as a share of their economies. However, countries such as Hungary border Ukraine and would be on the front line in the event of a supposed Russian invasion, but the Hungarian government seems to consider this scenario unrealistic.
📜 The bureaucracy in Europe is becoming tense. The EU’s top diplomat responded sharply to Spain’s decision to send a single lead ambassador to Trump’s peace negotiations. “For what purpose am I here?” In response, Kaja Kallas said, “We’re told.”
🤔 However, Kallas’s ability to deal with complex tasks could be questionable. A video recently went viral in which, during a public interview, she suggested that if Europe failed to defeat Russia, how was Europe going to convince its Asian allies that it could also defeat China? Eroding international relations even further, if that were possible, in what seemed like a slip of the tongue by someone clumsy or inexperienced.
💣 As part of new military capabilities objectives it hopes to agree on in June, NATO wants European partners and Canada to raise their stockpiles of weapons and equipment by around 30%. The US won’t need to spend much more to meet these new goals, but the other countries will have to put up a lot more money. The previous three years have seen European nations pour their munitions into Ukraine, depleting the continent’s stockpiles of TNT, gunpowder, and other essentials.
📊 Market View:
📈 US futures are still trying to resume their upward trend. So far, it looks like we will close the week with better results than the previous one. Mini S&P 500 futures are looking to consolidate above 5700 points, although market risks remain active. Meanwhile, Nasdaq 100 futures will try to close the week above 20,000 points; they are currently trading at 19,855 points.
💵 The dollar index (DXY) is back at the top of its channel, exceeding 104 points. Over the past two weeks, it has fluctuated between 103 and 104 points. The EUR/USD pair yesterday moved away from the 1.09 area, falling back towards 1.0840, the level at which it now stands.
📉 US bond yields are falling again, boosted by statements from the Fed this week, which promises at least two rate cuts this year. The 2-year bond stands at 3.96%.
📈 In Europe, the DAX 40 opens today’s session in positive territory, very close to its all-time highs, trading at 23,185 points.
🛢️ The crude oil market continues to show erratic movements but with an upward trend, driven by growing tensions in the Middle East. A few hours ago the price of a barrel of Brent reached $72.45, although the graphs suggest a possible downward correction in the next few hours.
💰 Gold futures seem to be consolidating above $3,000. After reaching $3,065 per ounce in yesterday’s session, they fell slightly to the current $3,035.
💻 Bitcoin broke through the $85,000 resistance level, reaching $87,470, but has fallen back again and is now trading in the $83,800 zone.
📅 Key events today: UK public finances (Feb), Eurozone current account (Jan), consumer confidence (Mar), Canada retail sales (Feb). Fed Presidents Goolsbee and Williams, plus ECB’s Escriva, will speak on economic insights.
